Friday, March 28, 2014

Zombies are more popular now than at any time I can
remember. There are new zombie movies coming out, zombie games, zombie parties,
and even self-defense products for the upcoming zombie apocalypse. There is one more Zombie Threat you must
protect yourself from, ZOMBIE DEBT!

Zombie Debt is a collection that has been “termed” off your
report. In other words, it has reached its seven year expiration and been
removed automatically from your credit report. Then collectors try to call and
collect on “Dead Debts” or “Zombie Debts.” It is as if the seven plus year old
debt has risen from the grave and come back to haunt us. Imagine your old debts
doing the slow zombie shuffle to your door yelling, “Pay me, pay me!”

Zombie Debt Collecting is becoming more common. This is
particularly true with people who don’t track their finances well and don’t
follow their credit report. Bill collectors are taking advantage of their
naiveté and making threats about legal actions if payments don’t start right
away. These tactics are working in the lower income communities. Typically they
are going after old credit card debt.

Consumers need to know their rights in regards to credit
reporting. I present a workshop in the community and at my credit union titled,
“The Myths of Credit.” The presentation goes over the top ten myths of credit
and an emphasis is put on managing and understanding collections. Too many
people don’t understand that a collection can only be collectable for seven
years and not beyond that. However, these collection agents continue to attempt
to collect debts that are well beyond the seven year period. Also, once
families go into an agreement with the collector on a Zombie debt, they need to
stick to it and make their payments as the collection agent could now make this
a new collection for nonpayment due to the payment agreement/promissory note
the consumer might sign.

How should a person handle collection calls and avoid Zombie
Collections? Regrettably, it is not as simple as shooting a zombie in the head
and ending the threat.

Before a collector calls:

1.Access your credit report through AnnualCreditReport.com. You can access all three bureaus’ reports here. You
will never be in the dark about your credit status. You will always know when a
collection has gone on to your report and when it expires. This is a free
service.

2.Sign up for CreditKarma.com. They will notify
you of any changes in your score and provide the info for those changes; such
as a collector “re-aging” a collection or putting an old expired collection
back on your report with a new date to make it appear current. This is also a free
service.

When a collector calls:

Don’t admit to anything. Don’t agree to
payments. Your agreement to making payments or even acknowledging the debt could provide
the company the legal right to collect the debt and may reinstate a dead debt
and make it a real Zombie!

Make them identify themselves and the details of
the debt they are collecting; dollar amounts and the date the collection became
active on your credit report (AKA First date of delinquency: The legal term for
the first day a debt goes on your credit report). This date can clue you into
whether they are collecting on a Zombie debt.

Don’t fall for the traps. Agencies will
sometimes “re-age” the debt, (reporting the debt to the credit bureau as if
it’s new). They might promise to wipe off the “red checkmark” on a credit
report, of sometimes do a “bait and switch” where they tack on the balance of a
zombie debt to a new credit card offer.

Ask them to validate the date and amounts of the
collection and send them to you in writing. This should also include asking
them for the credit card agreement you signed. Double check the statute of
limitations in your state. Generally, seven years is the accepted period of
collection. If the debt was discharged thru a bankruptcy they cannot collect
it.

If you have determined that you are not
responsible for the debt due to age of the debt or other written agreements
such as settled or paid in full, write a letter to the collection agency and
inform them that you will not pay the debt and share the reason for it as well
as any copies of evidence you have showing the debt is no longer collectible.

Collectors often like to threaten payees with
court. “If you don’t pay this, we will take you to court!” With most modest
credit card debts it is just not economically feasible to hire attorneys to go
after the payees. This is a common threat with Zombie debt. If your debt is
expired and the collector makes this threat, it is an empty threat with nothing
to back it up. No one is going to spend big money ($500 per hour!) to hire an attorney and pay
for court costs to collect small expired debts.

Check your credit report annually. Review it and
compare it to the previous year’s report and determine that all items on the
report are current and valid.

Friday, March 14, 2014

With the recent electronic data theft from Target, Neiman
Marcus, and others in the 4th quarter of 2013, many people are
looking for an alternative to their bank or credit union issued debit card. We
are getting a lot of questions like:

How safe is my debit card?

What happens if I find unauthorized electronic
debits in my bank statement?

How do I get reimbursed for unauthorized usage
of my card? How long does it take?

Bank customers and credit union members all over the country
have concerns about the safety of their data. Let’s be clear here, your
financial institution very likely has the best anti hacking software made
today. There has not been a significant breach of banking data since 2011. How
often are retail merchants the victim of identity theft hackers? It seems like
every month we hear about a new breach!

The problems really lie with the retailers like Target.
Their security was so poor the thieves were able to use common malware that had
been used before in other data breaches and the bad guys didn't even encrypt where the
money was going! Essentially, Target was broken into by an amateurish gang who
left all kinds of evidence of what was happening, but Target’s IT department
failed to recognize the danger. (See the article in the Minneapolis Star Tribune for a story on the methods of the
thieves.)

Target will not be paying for anyone’s monetary losses resulting from the fraud. They
won’t be paying the millions of dollars it cost the financial institutions to
replace all the compromised debit and credit cards. Retailers have no
responsibility to their customers when there is a data breach. For many of you this is a very surprising revelation but that is how it
works today. The financial institutions are forced to pay for their customer’s losses
after a hacker has broken into the merchant’s computerized payment system.
Target’s breach cost banks and credit unions $200 million so far! It cost
credit unions in Wisconsin $750,000 alone. The numbers for California are still
being calculated.

The debit card is a viable alternative for paying in store
charges as well as preauthorized transfers. When managed properly, it has very
strong anti-fraud/anti-theft procedures. The Federal regulation known as Regulation
E provides consumer protections for fraud against unauthorized use of a debit
card. One has 60 days from the issuance of their account
statement in which the problem or error occurred
to contact their financial institution and file a Reg E complaint. This is true
for banks and credit unions.

Once the complaint is filed it takes about 48 hours for most
institutions to issue provisional credit to
their clients for the disputed items. Each will
have a different procedure so you should make yourself familiar with the
procedure at your institution. The reimbursement is pending an investigation into the fraud. Most investigations are
completed within 10 days resulting in final credit or revocation of credit. Reg E limits a consumer's liability for unauthorized electronic
fund transfers, such as those arising from loss or theft of an access device,
to $50; if the consumer fails to notify the depository institution in a timely
fashion (>60 days after the statement was issued), the amount may be $500 or
unlimited.

The key to this is that customers
of banks and credit union members need to keep an eye on their accounts. It is
so much easier today than 10 or 15 years ago as we now have online and mobile
banking. Our customers and members can keep up on their accounts while on the
run and be able to address any inconsistent transactions immediately with their
institution. The faster someone reports an unauthorized transaction, the faster
the institution can reimburse them.

One of the reasons credit cards
are being pushed as a payment alternative is that the credit card companies are
pushing this issue and have been for many years. My friends at Visa would want
people to pay all their bills and groceries with a credit card and then write
one check at the end of the month to pay all. According to the credit card
companies this protects your checking account from being exposed to fraud. Of
course, the credit card companies would be very pleased if you could only pay a
portion of their bill. Then the consumer will be paying interest and that is
the issuers’ primary desire!

For domestic payments, I would use
my debit card and keep a close watch on my checking account thru my online
banking program. I would definitely use a credit card when traveling
internationally.